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1 Ann E. Futrell & Lara Robillard, CBO Explains Common Sources of Uncertainty in Cost Estimates for Legislation 1 (February 13, 2025)

handle is hein.congrec/cboescnss0001 and id is 1 raw text is: CBO Explains Common Sources of Uncertainty in Cost Estimates for Legislation The Congressional Budget Act of 1974 requires the Congressional Budget Office to prepare a cost esti- mate for nearly every bill that is approved by a full committee of either the House or Senate. For those estimates, CBO produces a point estimate-that is, a specific amount-rather than a range. The estimates specify the legislation's likely effects on federal outlays and revenues compared with the agency's projec- tions of what would occur under current law over a 10-year period (projections often referred to as CBO's baseline). Lawmakers can use CBO's cost estimates to inform their deliberations and enforce budgetary rules. Those estimates generally reflect the middle of the distribution of the most likely budgetary out- comes that would result if a piece of legislation was enacted. Though representing the agency's best assessment of the legislation's budgetary effects, estimates can be subject to uncertainty arising from various sources. This document describes how CBO addresses the most common sources of uncertainty in its cost estimates. Although uncertainty has many sources, this document addresses six. • Broad legislative language • Budget projections under current law • Insufficient data or research material • Varied eligible population • Behavioral responses • Dependence on a future event Note: This document is one in a series of primers explaining elements of CBO's work to support the budget process and to help the Congress make budget and economic policy. Those primers include CBO Describes Its Cost-Estimating Process (www.cbo.gov/publication/59003) and CBO Explains How It Develops the Budget Baseline (www.cbo.gov/publication/58916). All primers in the series are available at www.cbo.gov/topics/budget/budget-concepts-and-process. For more on uncertainty in CBO's analyses, see Congressional Budget Office, Transparency (accessed February 10, 2025), www.cbo.gov/about/transparency.

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